Options Check-Up: Gogo Inc, Merck & Co., Inc., and Yelp Inc

Analyzing recent option activity on GOGO, MRK, and YELP

Dec 24, 2014 at 7:59 AM
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Among the stocks attracting attention from options traders lately are airplane wireless provider Gogo Inc (NASDAQ: GOGO), pharmaceutical firm Merck & Co., Inc. (NYSE:MRK), and online review issue Yelp Inc (NYSE:YELP). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on GOGO, MRK, and YELP.

  • GOGO has tumbled this year, losing roughly 33.8% of its value year-to-date to settle at $16.43. Accordingly, sentiment in the stock's options pits has grown increasingly bearish. Gogo Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.94 stands higher than 92% of all similar readings taken in the past year, showing a healthier-than-usual appetite for puts over calls during the past two weeks. Relatively speaking, short-term options have never been this cheap for the equity in 2014, as its Schaeffer's Volatility Index (SVI) of 46% is the lowest such reading taken this year. Short sellers have also taken an interest in GOGO -- short interest accounts for nearly 27% of the stock's float, which would take just under three weeks to cover, at average daily trading volumes.

  • Shares of MRK have improved in 2014, adding 14,3% year-to-date, despite a 2.97% loss yesterday -- the result of a sector-wide swoon -- to perch at $57.21. Regardless of Merck & Co., Inc.'s positive yearly growth, option buyers have been picking up puts over calls at a faster-than-usual-clip; the security's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.04 ranks in the 96th percentile of its annual range. Additionally, MRK's Schaeffer's put/call open interest ratio (SOIR) of 1.39 sits just 4 percentage points below a 52-week peak, showing a bigger-than-usual preference for short-term puts over calls. However, short-term options are relatively inexpensive for MRK at the moment, as its SVI of 18% ranks in the 33rd percentile of all similar readings taken in 2014.

  • YELP has struggled on the charts, shedding 22.6% of its value year-to-date to land at $53.36, roughly 8.7 percentage points away from its annual low of $49.11. In defiance of this downward trend, sentiment in the stock's options pits is extremely bullish. Yelp Inc's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.33 is higher than 96% of all similar readings taken in the past year; an unwinding of optimism in the equity's options pits could send the shares lower. Meanwhile, YELP's short-term options are currently cheap, relatively speaking, as its SVI of 44% sits in the mere 7th percentile of its annual range. On top of that, YELP's Schaeffer's Volatility Scorecard (SVS) of 100 indicates the shares have made aggressively large swings over the past year, relative to what the options market has priced in.
 

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